LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO, JR.

, represented by
their Attorney-In-Fact, ALFREDO M. PEREZ, Petitioners, vs. ALLIED BANKING CORPOR
ATION, Respondent. G.R. No. 171460 July 24, 2007 Facts: Perla executed a Special
Power of Attorney (SPA) in favor of her husband, Julian D. Mercado (Julian) ove
r several pieces of real property registered under her name, authorizing the lat
ter to perform the following acts: 1. To act in my behalf, to sell, alienate, mo
rtgage, lease and deal otherwise over the different parcels of land described he
reinafter x x x 2. To sign for and in my behalf any act of strict dominion or ow
nership any sale, disposition, mortgage, lease or any other transactions includi
ng quit-claims, waiver and relinquishment of rights x x x 3. To exercise any or
all acts of strict dominion or ownership over the above-mentioned properties, ri
ghts and interest therein. On the strength of the aforesaid SPA, Julian obtained
a loan from the respondent. Still using the subject property as security, Julia
n obtained an additional loan from the respondent. It appears, however, that the
re was no property identified in the SPA and registered with the Registry of Dee
ds. What was identified in the SPA instead was the property different from the o
ne used as security for loan. Julian defaulted on the payment of his loan obliga
tions. Thus, respondent initiated extrajudicial foreclosure proceedings over the
subject property which was subsequently sold at public auction wherein the resp
ondent was declared as the highest bidder. Petitioners initiated an action for t
he annulment of REM constituted over the subject property on the ground that the
same was not covered by the SPA and that the said SPA, at the time the loan obl
igations were contracted, no longer had force and effect since it was previously
revoked by Perla. In the absence of authority to do so, the REM constituted by
Julian over the subject property was null and void; thus, petitioners likewise p
rayed that the subsequent extra-judicial foreclosure proceedings and the auction
sale of the subject property be also nullified. Issues: (1) Whether or not ther
e was a valid mortgage constituted over subject property. (2) Whether or not the
re was a valid revovation of SPA. (3) Construction of powers of attorney. Ruling
s: (1) In the case at bar, it was Julian who obtained the loan obligations from
respondent which he secured with the mortgage of the subject property. The prope
rty mortgaged was owned by his wife, Perla, considered a third party to the loan
obligations between Julian and respondent. It was, thus, a situation recognized
by the last paragraph of Article 2085 of the Civil Code that third persons who
are not parties to the principal obligation may secure the latter by pledging or
mortgaging their own property. There is no question therefore that Julian was v
ested with the power to mortgage the pieces of property identified in the SPA, h
owever, the subject property was not among those enumerated therein. Julian was
not conferred by Perla with the authority to mortgage the subject property under
the terms of the SPA, the real estate mortgages Julian executed over the said p
roperty are therefore unenforceable.

(2) The said SPA was revoked by virtue of a public instrument executed by Perla.
To address respondent s assertion that the said revocation was unenforceable agains
t it as a third party to the SPA and as one who relied on the same in good faith
, the rule is that an agency is extinguished, among others, by its revocation (A
rticle 1999, New Civil Code of the Philippines). The principal may revoke the ag
ency at will, and compel the agent to return the document evidencing the agency.
Such revocation may be express or implied (Article 1920, supra). (3) Rule of st
rict construction- where the terms of the contract are clear as to leave no room
for interpretation, resort to circumstantial evidence to ascertain the true int
ent of the parties, is not countenanced. The law is that if the terms of a contr
act are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulation shall control. The clear terms of the con
tract should never be the subject matter of interpretation. Equally relevant is
the rule that a power of attorney must be strictly construed and pursued. The in
strument will be held to grant only those powers which are specified therein, an
d the agent may neither go beyond nor deviate from the power of attorney. Where
powers and duties are specified and defined in an instrument, all such powers an
d duties are limited and are confined to those which are specified and defined,
and all other powers and duties are excluded. Qualification of the rule- this is
but in accord with the disinclination of courts to enlarge the authority grante
d beyond the powers expressly given and those which incidentally flow or derive
therefrom as being usual and reasonably necessary and proper for the performance
of such express powers.